Last week BBC Panorama and the Guardian newspaper, following international collaboration with various other media organisations, broke news of how Britain’s biggest bank, HSBC, aided some of its wealthiest clients in evading tax. Here, Nicholas Lord analyses why it is that otherwise ‘good people’, in the context of business organisations, indulge in such ‘white-collar’ deviant behaviour.

According to the coverage from the Guardian and the BBC Panorama programme, HSBC’s Swiss banking arm assisted wealthy clients in dodging taxes and concealing millions of dollars of assets by providing untraceable cash and advising clients how to sidestep domestic tax authorities, such as HMRC in the UK.

While the nature of the activities may be ‘criminal’, HSBC has not been and is unlikely to be criminally convicted for the current tax evasion scandal – the antiquated system of corporate criminal liability in the UK requires the ‘controlling mind’ to have been aware of the crimes but this is difficult to prove in large organisations. If the UK authorities do have jurisdiction, non-criminal sanctions are more likely.

As a criminologist, a key question to ask is why individuals and organisations engage in such ‘white-collar’ criminal behaviour? Clearly, the HSBC case involves the deviant activities of ‘individual’ employees but corporations are also ‘people’ (in the legal sense). A corporate entity is a constellation of individuals but its ‘organisational mind’ can itself take on an existence. So whose behaviour do we need to explain and where does responsibility and accountability lie?

Often in cases of corporate crime and deviance there is a tendency by corporations to individualise such behaviour. By directing blame towards particular ‘bad’ employees, or ‘rotten apples’, it is implied that occasional offending is unavoidable and that such individuals are in some way pathological, possessing deviant personality traits and characteristics (e.g. can HSBC’s behaviour be reduced to one or more ‘rogues’ in the company?). However, those traits attributed to ‘bad’ individual white-collar offenders, such as ambitiousness, recklessness, risk-taking or egocentricity, are common across the population as a whole, and often exist within successful (and non-criminal) business people. In other words, those individuals at the centre of the HSBC scandal are likely to be ‘good’, ‘normal’ people.

We might explain their behaviour in relation to (i) the rational choices they make in pursuit of personal (or organisational) gain (e.g. HSBC stood to profit from the deviance), (ii) how such individuals might rationalise or ‘neutralise’ their offending behaviour (e.g. ‘everyone is at it’, ‘I was protecting the business’), or (iii) the lack of attachments that such individuals have to society (e.g. perceiving there to be no direct victims as is the case of most ‘conventional’ crimes).

However, individual level explanations are limited as they do not sufficiently account for the influence of organisational cultures (e.g. it’s likely that HSBC employees learned deviant behaviour in the course of their occupation) or wider political-economic/cultural structures (e.g. does the pressure to make profit encourage people to act differently?) – a focus on the individual shifts attention away from the ‘rotten barrel’ (i.e. the policies, practices and culture of the organisation).

Organisational cultures often provide the means, setting, rationale and opportunity for certain crimes. Organisations cannot have intent, guilt, or motivation, yet their features may in some way induce offending behaviour. Some organisations may exhibit pathological characteristics (e.g. within HSBC was there a diffusion of responsibility, an absence of clear operating procedures, poor internal compliance or destructive social dynamics?).

Similarly, certain occupations or even the nature of the type of business and industry itself may also facilitate crime. For example, under which economic conditions must corporations operate? What is the nature of the market and how does the size/complexity of the business relate to opportunities to offend? Do corporate cultures/goals consist of tempting or luring arrangements that ‘invite’ individuals to offend? It is the very nature of corporate entities to seek to promote the generation of wealth for shareholders and investors and this can result in the construction of the ‘organisational mind’ where practices, processes and collective decisions to benefit the corporation become more than simply the sum of individual actions. In such settings, the morality, voice and internal restraints of ‘good’ individuals may be suspended and become lost in the ‘groupthink’ of the organisation, a context reinforced by the potential for the depersonalisation of one’s actions and the cognitive dissonance of colleagues.

The wider cultural/political-economic context is also of great significance. Some have argued that late capitalism may induce crime as the associated individualist enterprise culture, together with free-market principles, deregulation and the (non-)actions of the state in legitimising the pursuit of wealth, lead to ‘amoral’ calculations by individuals for personal and corporate benefit as well as the creation of social inequality. An individual’s social structural position (e.g. well-educated, wealthy individuals part of privileged pre-existing social networks) provides access to opportunities to commit white-collar offences, like large-scale tax evasion.

While this may be a persuasive and convincing narrative, a realist appreciation leads us to conclude that such a perspective may over-predict criminality as economic markets are relatively stable, as ethical and morally responsible corporate policies can be profitable, and as notable legal and regulatory improvements have been made to govern business criminality.

So, why do otherwise ‘good people’, in the context of business organisations, indulge in criminal acts? To understand this, it’s clear we need to analyse (i) the immediate actions of individuals in the contexts of the offending environments, (ii) how and why opportunities are ‘made the most of’ by individuals, and (iii) how these issues relate to the wider economic and structural landscape.

But this has significant policy implications. The state and law enforcement authorities face great difficulties in accessing, understanding and influencing highly impenetrable corporate subsystems. In seeking to regulate corporations, the state is therefore often at a tactical disadvantage, meaning without self-reporting, admissions of guilt or whistleblowers/leaks (as in the HSBC case), such offences are likely to remain undetected.

Note: This article was originally published on the Manchester Policy Blogs and gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting. Featured image credit: George Rex CC BY-SA 2.0

About the Author

Nicholas Lord is a Lecturer in Criminology at The University of Manchester. He teaches in the areas of counter-terrorism, financial crimes, and policing, and has general research interests in white-collar and corporate crimes of a financial and economic nature such as fraud, corruption and bribery.